Rupert Murdoch has been denounced, humbled and forced to abandon a multibillion-dollar business deal because of the phone-hacking affair that has enraged the British public. But even a scandal of this magnitude is unlikely to loosen his iron grip on the media empire he has ruled for the past three decades.

Controversy

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Amid reports that the board of News Corp. was considering replacing the 80-year-old chief executive officer with the company's president, Mr. Murdoch defended the company before a hearing of British politicians and received a strongly worded endorsement from a long-time director.

“I can assure you there has been no discussion at the board level in connection with this current scandal about making any changes,” said Thomas Perkins, a U.S. venture capitalist who has been on News Corp.’s board since 1996. “The board supports top management totally. The board has been misled, as has management, by very bad people at a very low level in the organization.”

The company has been ensnared in scandal for three weeks, since the news broke that its News of the World tabloid had hacked the voice-mail of a 13-year-old murder victim in their search for story leads. The scandal has reached the top levels of politics and the police in Britain, and has some calling for Mr. Murdoch to step down.

But while political pressure can occasionally force change in corner offices, few companies are structured like News Corp. Most of its shareholders have no voting rights; Mr. Murdoch and his family control about 40 per cent of the voting shares, meaning that even if he steps aside to a lesser role, he will still be firmly in control of what happens in the boardroom.

Still, the scandal has caused some to speculate that Chase Carey, News Corp.’s president, deputy chairman and chief operating officer, could be installed as CEO to help distance the company from the affair and keep it from affecting holdings in the United States.

Lazard Capital analyst Barton Crockett said investors would welcome such a change because of Mr. Carey's reputation as a manager who prefers to give cash back to shareholders rather than invest in new initiatives and takeovers. Under Mr. Murdoch, the shares have done very little in the past decade, as he has deployed cash in a series of questionable or expensive acquisitions – such as a $5.1-billion (U.S.) deal for Dow Jones – rather than give it back to investors as dividends.

The company’s shares also trade at a discount to industry peers, partly because of the dual-share structure that ensures Mr. Murdoch can control his own destiny, whether his board of directors wants him to stick around or not. After the Murdoch family, the next largest shareholder is Prince al-Waleed bin Talal, at 7 per cent of the voting shares, according to Bloomberg data. No other shareholder has more than 2 per cent.

“It is very unlikely that any of those smaller holders could get together in the numbers needed to effect change,” said Thomas Eagan, managing director at Collins Stewart LLC in New York.

Even if Mr. Murdoch were to accept a lesser role to alleviate the pressure, he could eventually place himself back in charge, or hand things over to his son James – who runs News Corp.’s European operations.

“The unique thing about this situation is usually you have the traditional mechanism of shareholders coming in and buying up shares to take some control,” said Walter Todd, who manages $1-billion in assets for Greenwood Capital Associates in South Carolina. “That's not available in this case. He also controls the board with his shares, so the remedies you may see in other situations aren't available here.”

Mr. Rupert's best protection may come from the analysts who follow the company. Although he has been sharply criticized for some of his purchases, they have maintained bullish stances throughout the crisis because of the strength of the company's core holdings.

Indeed, even an unlikely breakup of the company has been interpreted as good news by the analysts, because it would put more money in the pockets of the investors who have watched their shares fall as much as 17 per cent since early July. Fourteen of the 22 analysts who follow the company have “buy” ratings on the stock.

“Investors continue to sell News Corp. because of the headline risk,” said Jason Bazinet, an analyst at Citigroup Global Markets who rates the shares a buy. “Some investors are selling because they fear one or more assets within the stable will be sold ... we don't think things scenarios are apt to unfold. But even if they do, our analysis suggests it's bullish for equity holders.”

Trouble in the boardroom

It’s not easy for shareholders to force the ouster of a controlling shareholder who is running a public company, but sometimes it happens:

Rupert Murdoch

The problem:

The CEO of media giant News Corp. has shut down News of the World and accepted the resignations of top lieutenants, but the moves have failed to stem a widening scandal involving illegal phone hacking and police bribery.

The potential outcome:

Mr. Murdoch is facing calls to step down as CEO to restore faith with new leadership, but it is unclear whether the pressure will have an impact while his family trust continues to wield 40-per-cent control through Class B voting shares.

Conrad Black

The problem:

The media baron was controlling shareholder of Hollinger International Inc. when allegations emerged that he had improperly taken company funds and disguised them as non-competition payments for tax purposes.

The outcome:

Lord Black was convicted of fraud and obstruction of justice in 2007 and is scheduled to return to jail in September after a series of appeals. The Hollinger empire collapsed in bankruptcy and he lost control of the companies.

Jim Shaw

The problem:

The son of Shaw Communications founder JR Shaw was promoted to the CEO job in 1998, but was dogged by rumours of health problems and a hard-partying lifestyle.

The outcome:

Mr. Shaw resigned as CEO last November after he was criticized for his behaviour at a company luncheon for investors where he appeared inebriated. He was replaced as CEO by his brother Bradley. JR continues to control 79 per cent of the voting shares.

Frank Stronach

The problem:

The founder of Magna International faced investor complaints about his record-setting annual compensation packages and the voting control he wielded while owning just a tiny piece of auto parts maker’s shares.

The outcome:

Mr. Stronach agreed to give up his dual-class shares in Magna in a controversial deal last year that saw him paid almost $1-billion for his stake, an 1,800 per cent premium to their market value.

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